3 ms·

A system that requires no outside intervention to perform its job optimally is equivalent to a solved problem. So quants will be out of a job once we understan

A system that requires no outside intervention to perform its job optimally is equivalent to a solved problem. So quants will be out of a job once we understand how to perfectly trade on the stock market.

TheAlchemist 8y ago
Which by definition is impossible... Once two different traders discover how to 'perfectly' trade, the game changes and as they say 'here we go again'
- munk-a 8y ago
  I disagree, the solution to remove stock market traders is to figure out a way to examine financial data and projections to such a fine degree that stock trading is no longer a sensible thing. Imagine a currency trader focused on USD & CAD, what would happen to their job if Canada decided to permanently pin their currency on the USD with a guaranteed exchange of .5 USD for 1 CAD, the markets surrounding arbitraging the currency would dissolve as .5 USD would always be 1 CAD (now in the real world there might be stability speculators, if Canada was viewed as politically unstable there might be a purpose to purchase .4 USD for 1 CAD, but ignore that for the purpose of the scenario).
  - TheAlchemist 8y ago
    Well, you are making quite a lot of assumptions here: - currency is very different from equities - while one could argue that a central bank deciding to peg it's currency to $ is a realistic scenario, it simply doesn't make sense for equities (an equity is basically a right for present and future earnings of a company - good luck 'perfectly' predicting that !) - as you note, there would still be speculators, since there is always uncertainty. There are numerous examples of countries pegging their currencies and then when unexpected happens... - traders / sales would still compete for order flow of the clients (and get the cut), so there would still be a game to be played albeit for smaller margins
  - subroutine 8y ago
    To name just a tiny fraction of things that'd be required for a perfect stalemate between automated stock trading platforms (due to them all being able to predict the market with perfect accuracy): * actions of any given platform doesn't meaningfully influence the market * all have ability to forecast weather with 100% accuracy * all have ability to perfectly predict human behavior * all acquire the exact same news at the exact same rate * all connect to the same exchanges with the same latency * all have the same amount of capital to leverage trades Simply put, there are incalculable ways for a trading platform to gain advantage over another, so I don't think this will be an issue in many lifetimes.
    - anonu 8y ago
      >> * actions of any given platform doesn't meaningfully influence the market Yes - this... Buying or selling even 1 share in the markets adds information to this giant calculating engine. Anything you do will alter the course of the future. I've never seen a backtested strategy that didn't look great on paper. The moment you drop it into the market - you can take a steep discount to your expectations.

TheAlchemist 8y ago

Which by definition is impossible... Once two different traders discover how to 'perfectly' trade, the game changes and as they say 'here we go again'

munk-a 8y ago
I disagree, the solution to remove stock market traders is to figure out a way to examine financial data and projections to such a fine degree that stock trading is no longer a sensible thing. Imagine a currency trader focused on USD & CAD, what would happen to their job if Canada decided to permanently pin their currency on the USD with a guaranteed exchange of .5 USD for 1 CAD, the markets surrounding arbitraging the currency would dissolve as .5 USD would always be 1 CAD (now in the real world there might be stability speculators, if Canada was viewed as politically unstable there might be a purpose to purchase .4 USD for 1 CAD, but ignore that for the purpose of the scenario).
- TheAlchemist 8y ago
  Well, you are making quite a lot of assumptions here: - currency is very different from equities - while one could argue that a central bank deciding to peg it's currency to $ is a realistic scenario, it simply doesn't make sense for equities (an equity is basically a right for present and future earnings of a company - good luck 'perfectly' predicting that !) - as you note, there would still be speculators, since there is always uncertainty. There are numerous examples of countries pegging their currencies and then when unexpected happens... - traders / sales would still compete for order flow of the clients (and get the cut), so there would still be a game to be played albeit for smaller margins
- subroutine 8y ago
  To name just a tiny fraction of things that'd be required for a perfect stalemate between automated stock trading platforms (due to them all being able to predict the market with perfect accuracy): * actions of any given platform doesn't meaningfully influence the market * all have ability to forecast weather with 100% accuracy * all have ability to perfectly predict human behavior * all acquire the exact same news at the exact same rate * all connect to the same exchanges with the same latency * all have the same amount of capital to leverage trades Simply put, there are incalculable ways for a trading platform to gain advantage over another, so I don't think this will be an issue in many lifetimes.
  - anonu 8y ago
    >> * actions of any given platform doesn't meaningfully influence the market Yes - this... Buying or selling even 1 share in the markets adds information to this giant calculating engine. Anything you do will alter the course of the future. I've never seen a backtested strategy that didn't look great on paper. The moment you drop it into the market - you can take a steep discount to your expectations.